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While the general consensus is that the first quarter of 2013 has largely met the hopes of anyone involved in the property market – directly or indirectly – looking deeper, it seems that the pattern which has emerged is different from other years, and is a result of London’s current commercial property predicament, whereby demand is not being met by supply.
A trend, which has kept figures positive, has emerged whereby fewer transactions are taking place, but of those that are, many are high-value transactions, which inevitably have an effect on the market of the immediate area as well as the capital as a whole.
Short term, there is realistically only one direction for the trend to head: the boom which we have seen in the last three months may slow, simply as a result of the lack of new and old buildings which are due to come onto the market. While figures remain good, a squeeze on the market can already be seen: figures for the first quarter of the year are estimated at £2.75 billion in comparison to the previous quarter of £3.98 billion.
In addition, it is possible that supply may be reduced further in the wake of the government’s proposals to allow change of use from office to residential without the need for planning permission.
The continuing uncertainty in Europe has helped direct investment to London, with overseas investors accounting for 71% of the value of all transactions last year.
With plenty of office space in London currently under offer – much of which comprises the ‘big money deals’ mentioned above – London looks set to keep investors’ nerves at bay for the time being. The fact that returns are being seen on investments made earlier in the financial crisis will additionally prop up the property market’s economy of today.
Sally Brough, of Morgan Pryce, comments, “The tentative optimism we have seen for a while looks likely to continue, and the more it does so, the more likely it is that a number of new buildings will get under way in London. This is what we need – not only to adjust the level of rents in some areas, but to give our clients an even wider range of choice of buildings and location.”
One of the areas which has seen noticeable deals take place this year is City and Docklands, where total sales of £1.34 million came from just four buildings – Palestra, 5 Canada Square, Ropemaker and Woolgate Exchange. It waits to be seen whether these big deals will have a consequential impact on lower-value deals.
Morgan Pryce is a specialist tenant acquisition agent with offices in Oxford Circus and the City. Morgan Pryce specialises in search, negotiation and project management and works exclusively for tenants.